Stocks Higher into Final Hour on Plunging Oil, Diminshing Financial Sector Fears, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Software longs, Alternative Energy longs, Retail longs, Semi longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is substantially higher, most sectors are rising and volume is above average. Investor anxiety is above-average. Today’s overall market action is very bullish. The VIX is falling 2.87% and is still above-average at 24.38. The ISE Sentiment Index is low at 102.0 and the total put/call is around average at .87. Finally, the NYSE Arms has been running above average most of the day and is currently 1.15. The Euro Financial Sector Credit Default Swap Index is falling 2.56% today to 87.29 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is unch. today to 138.18. The TED spread is falling 3.47% to 138.0. The AAII % Bulls rose to 25.0% this week, while the % Bears rose to 58.14%. This survey continues to register extraordinarily high bearishness, which bodes well for an extension of recent broad market gains. Oil continues to trade as if a significant top is now in place, however I want to see a convincing close below $120 to confirm the downtrend. I still think a bursting of the commodity bubble would mean substantially higher US stock prices over the intermediate-term. The commodity bubble has been the driving force behind the current "US negativity bubble." Google Inc.(GOOG), one of my longs, reports after the close. The set-up on the long side looks pretty good again. eBay(EBAY) and ValueClick(VCLK) just disappointed. Google’s short interest ratio is 1.23, up from .45 in January. As well, its open interest put/call ratio is currently .7, up from .35 in Mid-March. The stock is down 28% from its record high and down 10% since May. Finally, the majority of pundits seem very cautious on the shares ahead of the report. I suspect that we will see an initial knee-jerk sell-off in the stock, followed by a rally from current levels tomorrow. Over the intermediate-term, I still see significant upside and suspect its current forward p/e multiple of 26.4 will expand meaningfully as investors pay up for a true growth company that can execute in today’s sluggish macro environment. Nikkei futures indicate an +278 open in Japan and DAX futures indicate an +80 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, falling energy prices, diminishing credit market angst, less financial sector pessimism and bargain-hunting.